Supervisors vote 3-2 to not renew waste contracts

Joshua Sebold

Staff Writer

1/26/2011

In a split vote at a meeting Tuesday, Jan. 18, the Plumas County Board of Supervisors decided to give its waste management collection companies notice of the county’s intent to not renew the current contracts.

This was the first 3-to-2 vote at a board meeting in months and the action was preceded by a lively discussion.

New board chairwoman Lori Simpson opened the debate by telling the public the county ordered a forensic audit on its two waste management contractors in the prior year, which cost nearly $33,000.

She said a committee later discussed the resulting report with the contractors to look into possible contract revisions that could be made to follow some of the auditor’s recommendations.

Simpson told the public some of the main goals for changes in the contracts would be to address an “evergreen” clause the auditor referred to as “stone age” and “to make sure that our franchise contractors will get their increases on time.”

An evergreen clause causes a contract to constantly roll over until either side gives notice of its intent to not renew the deal.

Essentially the two current contracts are officially renewed every year, but this basically means the contracts never have an official end date. They are always at least five years away from ending but that clock doesn’t start ticking until notice is given.

Simpson said the other major recommendation from the independent auditor was for the new contracts to include a consumer price index (CPI), an equation intended to automatically suggest rate increase levels based on measurable economic indicators.

Chester Supervisor Sherrie Thrall responded that the county should give notice for non-renewal of the contracts immediately because “Each day that ticks by is another day that it’s extended.”

She said the evergreen clause always gave her heartburn, arguing that it, “along with other parts of the contract, stifles competition and also stifles any real incentive on their part to be real frugal other than having to come before us and beg.”

In terms of contract length Simpson said the auditor advised “there should be sufficient time to capitalize equipment and that’s usually a seven-year period to five-year period, and it can go as long as 10 years.”

New Graeagle Supervisor Jon Kennedy commented that the public wasn’t as concerned about the evergreen clause but really didn’t like the part of the contract that “guarantees a 10 percent profit.”

He said that part left no incentive to be frugal: “You can do whatever in theory and not watch your expenses and have a guaranteed 10 percent profit.”

The new supervisor argued that the contract length should be even longer than seven years.

He contended the county should use contract length as a bargaining chip to get a good deal with the contractors on recycling to address California Assembly Bill (AB) 39, which established mandates on solid waste levels.

Kennedy said other counties entered into 20- or 25-year contracts when that law came into effect, allowing contractors to buy new recycling equipment at lower interest rates by giving them more security, which means lower cost for customers in the long run.

“It doesn’t matter if there’s a 100-year contract, there’s always a clause in there that the county is protected against non-performance. If you don’t perform, see you later,” he argued.

Intermountain Disposal (IMD) manager Ricky Ross told the supervisors he agreed with many of their suggestions in theory but not necessarily in their characterization of events.

Addressing the “guaranteed profits” of 10 percent, he said “I’ve had to remind people lately it’s only a target; otherwise I wouldn’t have been in the red for the last three years.”

He added that the county’s routine refusal to approve rate increases at the needed level left his company “in desperate need of equipment.”

Ross also indicated he was the person who secured the current deal with the Lockwood Regional Landfill in Nevada.

He argued the contract with Lockwood included IMD, the county and Feather River Disposal, and all three would have to renew the contract in 2012 to secure the current rate.

The manager warned if the county failed to renew that contract “the tipping fee could go up tremendously and I know this for a fact because I sat over there at Sierra County at a solid waste meeting and I know what we’re paying in tipping fees at Lockwood.”

“We’re at $17.93 a ton right now, but they offered them $24.88 a ton.”

Ross said he wanted “a little more time to negotiate some of these items,” before the county gave notice to non-renew the current agreement.

After her earlier comments that the auditor was in favor of giving long-term contracts to help waste managers with financing, Simpson seemed to argue against that logic at this point.

“Ricky, what makes that any different from a logging contractor that has to buy equipment — or anybody?

“You’re saying that you’re just in this narrow little thing that you’re the only one that can’t get financing; well there’s all businesses that are facing that and they don’t have guarantees.”

“But we’re picking up solid waste and that’s a public health and safety issue,” Ross disagreed.

“No matter if we’re making money or losing money we have to continue to pick up that garbage.”

Simpson held her ground, arguing that she was following the auditor’s advice, although it seemed to contradict her earlier characterization of that same auditor’s advice.

“We’re going by recommendations that the county paid a considerable sum of money (for the audit), that’s why some of us feel like: we paid, we want to see the county’s money put to good use — procedures implemented, suggestions implemented, that’s all this is about really.”

The original intention of the board in approving the audit was not simply to investigate possible adjustments to the contract.

The county counsel office routinely reviews contracts and could presumably collaborate with public works to brainstorm contract improvement ideas for much less than $30,000.

The intention of the audit was to ensure that proposed rate increases were needed and that the two contractors were running efficiently and weren’t wasting county funds.

As Eastern Plumas Supervisor Terry Swofford put it during a meeting Sept. 1, 2009, “We were going to have an audit and I did not want to move ahead with this (rate increase) until we had that audit.

“And I’m not talking about some little look-at-their-books audit. I’m talking about: you said forensic audit, and that’s where we need to go. There’s something going on here.

“There’s a big discrepancy, there’s something wrong.”

When the forensic audit arrived it did not find anything significantly wrong.

It indicated both companies were run efficiently in good faith and suggested some minor alterations to future contracts.

After Simpson’s speech about the audit, Kennedy turned the conversation back to recycling.

He said AB 39 was passed in 1990, mandating every city and county in the state “to reduce their solid waste through recycling, reusing and reduction by 25 percent in 1995, down to 50 percent in 2000.”

“It’s 21 years later; we haven’t met it,” he emphasized.

The new supervisor said the county was lucky the state had been patient in implementation of the law thus far but eventually “that hammer is going to come down on us.”

He suggested the board “start the clock ticking right now. Don’t renew the contract; however, we better have a new contract in a couple weeks because I would hate to be a garbage company, personally. Three years down the road, we haven’t gotten a new contract, I’d probably be planning to pack up or try to sell or something.”

Kennedy then asked Public Works Director Bob Perreault if a new contract could be completed in 30 days.

“If we worked on nothing else,” Perreault responded. “There are too many other pressures that need attention.”

“If we just postpone this vote for 90 days … ” he continued, which led to groans from several board members.

Hearing his colleague’s reaction, Kennedy remarked that it seemed unlikely the rest of the board would wait that long to vote and asked Perreault if he really needed to reinvent the wheel on the new agreement.

The director’s response provided a little context in terms of the government process he had to fight through.

“I have highway department contracts that are templates and I can’t get them approved in a short period of time and this has to go back at some point to the two franchise contractors and they’re going to need time in house to talk to their representatives and I think 90 days is a fast track.”

County Administrative Officer Jack Ingstad asked County Counsel Craig Settlemire how long he thought the process would take.

The attorney said two months was his estimate for this type of document.

Ross commented that the county didn’t need to take action to leverage the waste management contractors into negotiating a new contract because the companies wanted a CPI and some of these other measures in the original document to begin with.

“The way the contract is written now was not even our idea. It was the board at that time’s idea.”

Feather River Disposal manager Mike Clements argued if the board gave notice to non-renew the contract at the drop of a hat it would affect morale among the contractors’ employees.

Clements said they would be subjected to unnecessary rumors and stress.

Simpson disagreed: “I just think we’re being good, trying to use the county’s money, having some leverage that we can make sure we’re guardians of the county’s money, and we’re just looking out.

“We got recommendations; we want to implement them.”

Clements said he read the audit too and asked the supervisor, “Did it say you should recommend canceling it just like that, or did it say ‘try to negotiate what both parties and the county want’? I didn’t read it that ‘hey, let’s cancel that and get the ball rolling.’”

“Well we want to get the ball rolling, period. That’s it,” Simpson retorted.

The Feather River Disposal manager told her she should put a time frame on the negotiations if that was her goal instead of “throwing the baby out with the water” and stressing his employees.

Thrall disagreed, arguing that giving notice would “be an incentive to all parties concerned to move ahead with haste,” and motioned for the county to give that notice.

Swofford seconded the motion.

Kennedy asked the contractors if the proposed action could have an effect on any long-term financing deals they were currently negotiating.

Both managers responded that they were currently trying to buy equipment such as trucks and loaders but couldn’t realistically answer that question on such short notice.

The motion passed with Kennedy and Indian Valley Supervisor Robert Meacher voting no.

As the agenda item came to a close Simpson emphasized the county would continue to do business with the two current contractors and wasn’t issuing a request for proposals.